Ocwen calls investor claims baseless

Karen Freifeld

3 Min Read

A loan servicing agent is reflected in a small mirror on a computer terminal at Ocwen Financial Corporation in West Palm Beach September 10, 2009. REUTERS/Hans Deryk

(Reuters) - Mortgage servicer Ocwen Financial Group (OCN.N) said on Monday a group of investors had no basis for claiming it failed to live up to its agreements to collect payments on $82 billion worth of home loans.

Investors including BlackRock (BLK.N), Metlife (MET.N) and Pimco (ALVG.DE) sent a notice of non-performance to the company and trustees for 119 residential mortgage-backed securities trusts, the first step toward a lawsuit.

The investors claim that Ocwen performed worse than other servicers each year from 2009 through 2013 and that the trusts suffered losses of more than $1 billion because of the company’s deficient performance, according to a copy of the notice reviewed by Reuters.

The investor group’s claims stem from its special interests and are not in the best interests of the trusts as a whole, a lawyer for Ocwen said in a letter dated Jan. 26.

“Ocwen denies that there is any basis for a default under the trust agreements,” attorney Richard Jacobsen, who represents Ocwen, wrote in the letter to Kathy Patrick, a lawyer for the investor group.

The investors want “to stop servicers from modifying loans and force them to foreclose on and evict as many struggling homeowners as quickly as possible,” Jacobsen wrote.

Patrick, who represents the investors, said Ocwen was resorting to “false attacks” rather than responding to its data.

The investors do not oppose loan modifications, Patrick wrote in a letter in response, but only how Ocwen does them. The company’s modifications re-default at higher rates than comparable loans with other servicers and can result in higher, not lower, payments for borrowers, she said.

The investors also object to Ocwen using trust funds to “pay” its borrower relief obligations under the 2013 national mortgage settlement, the letter said.

The mortgage servicer’s stock rose nearly 9 percent on Monday after the company avoided a suspension of its license to operate in California by reaching a $2.5 million settlement last week.

Last month, the company agreed to replace its chairman and pay New York $150 million after the state accused Ocwen of backdating letters to borrowers and funneling work to affiliates that may have led to improper foreclosures.

Up to Friday’s close, Ocwen’s stock had fallen 86.4 percent in the last 12 months.

Reporting by Karen Freifeld in New York; Additional reporting by Tanya Agrawal in Bengaluru; Editing by Saumyadeb Chakrabarty and Leslie Adler